FORM 10-Q/A
Amendment No. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended November 28, 1992
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from [ ] to [ ]
Commission File Number 1-7832
PIER 1 IMPORTS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 75-1729843
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
301 Commerce Street, Suite 600, Fort Worth, Texas 76102
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(Address of principal executive offices including zip code)
(817) 878-8000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [ X ]. No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares outstanding as of December 16, 1992
- ----------------------------- ------------------------------------------
Common Stock, $1.00 par value 37,173,357
<PAGE>
Items 1 and 2 of Part I of the Company's Quarterly Report on Form 10-Q for the
quarter ended November 28, 1992 are amended and restated as set forth below.
PART I
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Item 1. Financial Statements.
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PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
Nov. 28, Nov. 30, Nov. 28, Nov. 30,
1992 1991 1992 1991
-------- -------- -------- --------
(as restated) (as restated)
Net sales $144,923 $130,707 $463,422 $437,578
Operating costs and expenses:
Cost of sales (including
buying and store occupancy) 88,268 77,604 285,486 264,220
Selling, general and
administrative expenses 43,982 42,354 132,063 129,923
Depreciation and amortization 3,551 3,833 10,760 11,665
-------- -------- -------- --------
135,801 123,791 428,309 405,808
-------- -------- -------- --------
Operating income 9,122 6,916 35,113 31,770
Nonoperating (income) and expense:
Interest income (683) (323) (2,819) (634)
Interest expense 5,013 4,875 14,816 13,247
Trading losses (Note 1) 2,419 -- 2,419 --
Gain on sale of subsidiary stock -- (5,800) -- (5,800)
-------- -------- -------- --------
6,749 1,248 14,416 6,813
-------- -------- -------- --------
Income before income taxes and equity
in net income (loss) of subsidiary 2,373 8,164 20,697 24,957
Provision for income taxes 1,146 3,246 5,545 8,829
-------- -------- -------- --------
Income before equity in net income
(loss) of subsidiary 1,227 4,918 15,152 16,128
Equity in net income (loss)
of subsidiary (1,399) (235) 184 5,609
-------- -------- -------- --------
Net income (172) 4,683 15,336 21,737
Cumulative dividends on preferred
stock -- 1 -- 11
-------- -------- -------- --------
Net income available to common
stockholders $ (172) $ 4,682 $ 15,336 $ 21,726
======== ======== ======== ========
Net income per common share $.00 $.12 $.39 $.56
======== ======== ======== ========
Average shares outstanding during
period, including common stock
equivalents 39,232 39,099 39,131 38,826
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PIER 1 IMPORTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
(Unaudited)
November 28, February 29,
1992 1992
------------ ------------
(as restated)
ASSETS
Current assets:
Cash, including temporary investments of
$58,216 at November 28, 1992 $ 71,992 $ 9,001
Accounts receivable, net 38,117 33,519
Inventories 177,973 181,392
Other current assets 23,209 16,161
-------- --------
Total current assets 311,291 240,073
Properties, net 108,965 114,512
Investment in and advances to subsidiary 23,128 23,804
Other assets 11,612 8,016
-------- --------
$454,996 $386,405
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term debt $ 33,211 $ 23,228
Accounts payable and accrued liabilities 60,321 56,884
-------- --------
Total current liabilities 93,532 80,112
Long-term debt 146,996 106,787
Deferred income taxes 3,871 4,854
Other non-current liabilities 18,150 17,521
Stockholders' equity:
Common stock, $1.00 par, 100,000,000 shares
authorized, 37,225,000 issued 37,225 37,225
Paid-in capital 91,781 92,303
Retained earnings 67,479 53,844
Cumulative currency translation adjustments (286) 570
Less - 223,000 and 471,000 common shares in
treasury, at cost, respectively (2,067) (4,551)
Less - subscriptions receivable and unearned
compensation (1,685) (2,260)
-------- --------
192,447 177,131
-------- --------
$454,996 $386,405
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
November 28, November 30,
1992 1991
------------ ------------
(as restated)
Cash flow from operating activities:
Net income $15,336 $21,737
Adjustments to reconcile to net cash provided
by operating activities:
Depreciation and amortization 10,760 11,665
Deferred taxes and other (141) 7,641
Equity in undistributed earnings
of subsidiary (184) (5,609)
Gain on sale of subsidiary stock -- (5,800)
Changes in cash from:
Inventories 3,419 (2,776)
Accounts receivable and other current
assets (10,115) (4,854)
Accounts payable and accrued expenses 4,425 1,070
Other assets, liabilities and other, net 633 (43)
------- -------
Net cash provided by operating activities 24,133 23,031
------- -------
Cash flow from investing activities:
Capital expenditures (8,429) (4,698)
Proceeds from disposition of properties 1,077 13,978
Other investing activities (1,636) --
------- -------
Net cash (used in) provided by investing
activities (8,988) 9,280
------- -------
Cash flow from financing activities:
Cash dividends (1,662) (11)
Proceeds from issuance of long-term debt 72,432 24,344
Repayments of long-term debt (35,331) (45,790)
Proceeds from sale of subsidiary stock -- 18,072
Net borrowings (payments) under line of credit
agreements 9,983 (34,000)
Proceeds from sales of capital stock, treasury
stock, and other 2,424 2,068
------- -------
Net cash provided by (used in) financing
activities 47,846 (35,317)
------- -------
Change in cash and cash equivalents 62,991 (3,006)
Cash and cash equivalents at beginning of period 9,001 16,452
------- -------
Cash and cash equivalents at end of period $71,992 $13,446
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE><TABLE>
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED NOVEMBER 28, 1992
(In thousands)
(Unaudited)
<CAPTION>
Cumulative Subscriptions
Currency Receivable Total
Common Paid-in Retained Translation Treasury and Unearned Stockholders'
Stock Capital Earnings Adjustments Stock Compensation Equity
------- ------- -------- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance February 29, 1992 $37,225 $92,303 $53,844 $ 570 $(4,551) $(2,260) $177,131
Restricted stock grant and
amortization (18) (511) 575 46
Stock purchase plan, exercise
of stock options and other (504) (39) 2,995 2,452
Currency translation adjustments (856) (856)
Cash dividends, declared or paid (1,662) (1,662)
Net income, as restated 15,336 15,336
------- ------- ------- ----- ------- ------- --------
Balance November 28, 1992, as
restated $37,225 $91,781 $67,479 $(286) $(2,067) $(1,685) $192,447
======= ======= ======= ===== ======= ======= ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
/TABLE
<PAGE>
PIER 1 IMPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 28, 1992
AND NOVEMBER 30, 1991
(Unaudited)
The accompanying unaudited financial statements should be read in con-
junction with the Annual Report on Form 10-K for the year ended February 29,
1992, as amended by Form 8, filed September 17, 1992. All adjustments that are,
in the opinion of management, necessary for a fair statement of the financial
position as of November 28, 1992, as restated, and the results of operations and
cash flows for the interim periods ended November 28, 1992, as restated, and
November 30, 1991 have been made and consist only of normal recurring
adjustments except for net trading losses described in Note 1. The results of
operations for the three and nine months ended November 28, 1992, as restated,
and November 30, 1991 are not indicative of results to be expected for the
fiscal year because of, among other things, seasonality factors in the retail
business.
Note 1 - Trading losses
In late December 1995, the Company was made aware of losses of $19.3
million resulting from trading activities in a discretionary account by a
financial consultant retained to manage the Company's excess cash and short-term
investments. Net trading losses recorded in fiscal years 1996 and 1995 totalled
$16.5 million and $2.8 million, respectively. The Company's restatements had
no effect on net income for the full 1993 fiscal year; however, during the 1993
fiscal year, the Company incurred net trading losses of $2.4 million in the
third quarter and attained a net trading gain of $3.4 million in the fourth
quarter. The Company engaged in no trading activities during fiscal 1992. The
financial statements for fiscal 1992 and the first and second quarters of fiscal
1993 do not require restatement. The Company has not recorded any tax benefit
on these net losses since the realization of such benefit is not considered
likely based on the information available at this time. The effect of the net
trading losses on net income for the three and nine months ended November 28,
1992 was a reduction of $.06 per share.
<PAGE>
PART I
------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Pier 1 Imports, Inc. ("the Company") had net sales increases of 10.9% to
$144.9 million and 5.9% to $463.4 million for the third quarter and nine-month
periods ended November 28, 1992 compared to the same periods last year.
Comparable store sales improved 7.2% during the quarter and 2.7% for the nine-
month period. The Company has grown to a total of 606 retail locations at
November 28, 1992 compared to 587 a year ago. Sales trends improved during the
quarter due to improving overall economy and continued in-store and credit card
coupon promotions. The Company's expectations for sales increases during fiscal
1993 are 7% and for same-store sales are approximately 4%.
Gross profit, after related buying and store occupancy costs, as a
percentage of sales, fell 1.5% for the third quarter and 1.2% for the nine-month
period of fiscal 1993 compared to the same periods last year. These declines
resulted mostly from higher sales of lower margin items, primarily furniture,
and increased in-store promotions in October and November. Gross profit for the
nine-month period ended November 28, 1992 continues to reflect higher sales but
lower margins due to merchandise mix, lower retail prices on selected items,
credit card promotions and other selected price promotions. Store occupancy
costs, as a percentage of sales, improved 0.4% for the quarter and were
unchanged for the first nine months of fiscal 1993.
Selling, general, and administrative expenses, as a percentage of sales,
during the third quarter improved 2.1% to 30.3% of sales from last year's 32.4%
and for the nine-month period ended November 28, 1992 declined 1.2% to 28.5% of
sales. In total dollars, selling, general and administrative expenses during
the third quarter increased $1.6 million due to new store growth (19 net new
stores) and higher advertising costs that were offset partially by favorable
medical insurance and workers' compensation claim experience and improved Pier
1 credit card experience. Expenses for the first nine months of fiscal 1993
increased as a result of higher payroll and other store-related costs associated
with new store openings, higher advertising primarily in the first and third
quarters of fiscal 1993, offset by cost containments in physical inventory
costs, medical insurance and workers' compensation claims and litigation costs,
and favorable Pier 1 credit card results.
Depreciation and amortization expenses declined due to a slowdown in new
store growth since fiscal 1991.
Net interest expense of $4.3 million for the third quarter and $12.0
million for the nine-month period ended November 28, 1992 were down $0.2 million
and $0.6 million, respectively, from last year. This reduction resulted from
a decrease in the Company's debt (net of cash balances) position of $20.7
million from a year ago, coupled with this year's interest income on short-term
investments and a slight decrease in the effective rate.
In late December 1995, the Company was made aware of losses of $19.3
million resulting from trading activities in a discretionary account. The
Company has regularly designated a portion of its excess cash and short-term
investments for management by a financial consultant in the discretionary
account. The amount of funds deposited by the Company has varied during each
year, and the funds were generally withdrawn near the end of each fiscal year.
According to statements of the account provided by brokerage firms that executed
trading activity at the financial consultant's instructions, the funds were
invested in treasury bonds, treasury bond futures contracts and options on
treasury bond futures contracts. The futures and options contracts were often
used in a manner that provided a high degree of speculation and leverage to the
invested funds. As a result of the investigations of the trading losses, the
Company recorded $16.5 million of the net trading losses in fiscal 1996 and
restated its fiscal 1995 financial statements to record $2.8 million of the net
trading losses during that year. Fiscal 1996, 1995 and 1994 financial
statements and fiscal 1993 third and fourth quarter interim financial statements
have been restated to reflect the net trading losses and gains during those
periods based on information available to the Company. The restatements of the
third and fourth quarters of fiscal 1993 have no effect on net income for the
full 1993 fiscal year. The Company engaged in no trading activities during
fiscal 1992. The financial statements for fiscal 1992 and the first and second
quarters of fiscal 1993 do not require restatement. To the extent trading
losses are not offset by trading gains, the Company has not recorded any tax
benefit on these losses since the realization of such benefit is not considered
likely based on the information available at this time. The Company and a
Special Committee of the Board of Directors investigated the matter and found
no evidence to suggest that the Company's net losses from these trading
activities will exceed the $19.3 million recorded in fiscal years 1996 and 1995.
During the third quarter of fiscal year 1992, the Company's ownership of
Sunbelt Nursery Group, Inc. ("Sunbelt") was reduced from 100% to 56.6% in
Sunbelt's initial public offering. Net proceeds of the offering were used to
pay an $18 million dividend to the Company and to finance Sunbelt's on-going
store renovations and expansion program. The Company's pre-tax gain on the sale
aggregated $5.8 million.
The Company's effective tax rate for fiscal 1993 exclusive of the
aforementioned trading losses is estimated at 24%, compared to last year's rate
of 35.4% for the first nine months of fiscal 1992. The decrease is due to the
benefit of lower tax rates on income from foreign subsidiaries, tax-free
investment income and targeted job tax credits.
The Company recorded equity in losses of Sunbelt for the third quarter of
fiscal 1993 totalling $1.4 million versus a $0.2 million loss a year ago. For
the nine months ended November 28, 1992, the Company's equity in income of
Sunbelt declined $5.4 million to $0.2 million from last year's $5.6 million
income as of November 30, 1991. The declines are partially due to a reduction
in the Company's ownership interest from 100% during most of fiscal 1992 through
the third quarter, compared to a 49.5% ownership during fiscal 1993.
Additionally, Sunbelt's same-store sales declined 6.7% and total store sales
declined 4.3% during the first nine months of Sunbelt's fiscal 1993.
Operating income improved $2.2 million and $3.3 million during the third
quarter and first nine months of fiscal 1993, respectively. Net losses of $0.2
million or $.00 per share for the fiscal 1993 third quarter and net income of
$15.3 million or $.39 per share for the nine months ended November 28, 1992 were
below the prior year due to the trading losses of $2.4 million recorded in the
third quarter of fiscal 1993, the $5.8 million Sunbelt-related gain recorded in
fiscal 1992 and the resultant reduction in the Company's ownership interest in
Sunbelt's earnings compared to fiscal 1992, coupled with Sunbelt's weak results
during fiscal 1993 compared to a year ago.
Liquidity and Capital Resources
The Company's debt (net of cash balances) position declined $12.8 million
during the first nine months of fiscal 1993 and $20.7 million since November 30,
1991. Cash increased $63.0 million during the first nine months of fiscal 1993.
This change was comprised of cash from operations of $24.1 million, net proceeds
from the issuance of long-term debt of $72.4 million, net borrowings on short-
term notes of $10.0 million and other investing and financing activities of $0.2
million that were partially offset by payments on long-term debt of $35.3
million and capital expenditures of $8.4 million. Cash from operations was
positively impacted by a decrease in inventory ($3.4 million) and increases in
accounts payable and accrued expenses ($4.4 million), partially offset by an
increase ($4.6 million) in the Pier 1 credit card receivable during fiscal 1993
and trading losses ($2.4 million) during the period as discussed in Note 1.
The current ratio of 3.3 to 1 at November 28, 1992 improved over the 3.0 to 1
ratio at February 29, 1992 and at November 30, 1991.
In fiscal 1993, the Company has paid three quarterly cash dividends of
$0.015 each per share and has subsequently declared a cash dividend of $.02 per
share payable on February 17, 1993, but continues to retain most earnings for
expansion of the Company's business.
The Company opened 25 (net 21) new stores as part of its expansion program
during the first nine months of fiscal 1993 with 1 additional store to be opened
by fiscal year-end. Funds for new store development remaining in fiscal 1993
and the estimated 40 new stores (net 27) anticipated for fiscal 1994 are
expected to be provided by operating leases and $12 million of cash. The
minimum future operating lease commitments for fiscal 1993 are $84 million with
a total of $725 million at November 28, 1992. Current and future operating
leases are expected to be funded by cash flow from operations.
During the last quarter of fiscal 1993 and during fiscal 1994, the
Company's sources of funds will be operations, bank revolving credit and letters
of credit facilities, and operating leases. Currently, the Company has a total
of $155.5 million of short-term revolving credit and letter of credit agreements
of which $33 million is outstanding as short-term borrowings and an additional
$47.5 million is outstanding as letters of credit at November 28, 1992. In the
opinion of Company management, funds available from the sources previously
described above will be adequate to provide financial flexibility for expansion
and seasonal working capital requirements for the foreseeable future.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIER 1 IMPORTS, INC.
Date: August 9, 1996 By: /s/ Clark A. Johnson
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Clark A. Johnson, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: August 9, 1996 By: /s/ Susan E. Barley
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Susan E. Barley, Vice President and
Controller
(Principal Accounting Officer)
